Huawei faces 5G veto amid national security concerns

Chinese telco giant Huawei is all but certain to be excluded from providing equipment for Australia's soon-to-be-built 5G wireless networks, based on national security concerns, senior sources say.

With Prime Minister Malcolm Turnbull expected to announce the final decision soon, multiple sources have told The Australian Financial Review that national security agencies remain concerned about Huawei's links to the Chinese government and have recommended against letting the firm bid for 5G contracts.

"It's hard to see how compromising your telecommunications network is in the national interest," said one source familiar with deliberations. "The security agencies found it hard to see that there's any way around it."

Another with knowledge of the issue said Australia's security and defence agencies were firmly against allowing Huawei to provide equipment.

Foreign Affairs Minister Julie Bishop and Malcolm Turnbull during a bilateral meeting with Prime Minister of the Solomon Islands Rick Houenipwela and his delegation at Parliament House in Canberra on Wednesday.
Alex Ellinghausen

"The advice to government will be very direct, there will be very little wriggle room," said the source.

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The person said the thinking in Australia was similar to that in Washington where the defence establishment had come out strongly against Huawei and its compatriot, ZTE.

The decision, which a source said was expected "sooner rather than later", will only further rankle relations with China, which have been driven down by the impending passage of legislation cracking down on foreign interference.

National security concerns have already resulted in Huawei being shut out of the national broadband network and, on Wednesday, Mr Turnbull and his Solomon Islands counterpart Rick Houenipwela met in Canberra to seal a deal in which Australian aid money will be used to fund a $200 million high-speed, undersea communications cable connecting the Solomons, Papua New Guinea and Australia.

"We put up an alternative, and that's what I believe Australia should continue to do. We are the largest aid donor in the Pacific," she said.

"We are a long-standing partner of Solomon Islands, and I want to ensure that countries in the Pacific have alternatives, that they don't only have one option and no others, and so in this case we are in a position to be able to offer a more attractive deal for Solomon Islands and PNG, and they accepted it."

Mr Houenipwela said last week: "We have had some concerns raised with us from Australia and I guess that was the trigger for us to change from Huawei to now the arrangements that we are now working with Australia on."

In an apparent effort to get ahead of any government decision, Huawei's Australian chairman John Lord went on national radio last week emphasising that the company was not state-owned. He said Huawei was 18 months ahead of its competitors on 5G technology and hinted there could be major job losses if it was excluded from building the new networks in Australia.

"We have about 750 Australians employed," he said. "It's just huge and this is still the main part of our business in Australia: mobile broadband."﻿

Huawei supplies equipment to Optus and Vodafone's 4G networks in Australia, while Swedish giant Ericsson has been a long-term supplier to Telstra.

The other major players globally, who are bidding against Huawei and Ericsson for lucrative new 5G contracts, are China's ZTE and Finland's Nokia, which merged with Alcatel-Lucent in 2016.

The government is also under pressure from the US to exclude ZTE.

US concerns

During testimony before the US Senate Intelligence Committee in February FBI director, Chris Wray, singled out both companies and their capacity "to maliciously modify or steal information".

"[I'm] deeply concerned about the risks of allowing any company or entity that is beholden to foreign governments ... to gain positions of power inside our telecommunications networks," he said.

Despite broader federal government concerns about Huawei, the Chinese company is set to be awarded a $120 million communications contract to run Perth's rail network.

The US expressed its concerns about Huawei's involvement in Australia's 5G networks when Mr Turnbull visited Washington in February. The matter was raised directly with the Prime Minister during a meeting with the heads of the National Security Agency [NSA] and the Department of Homeland Security.

Under the new foreign interference laws, individuals and organisations in Australia with ties to foreign governments will have to register or face jail. Each will be given a chance to self-assess.

Mr Turnbull said yesterday that would be the same for Huawei and its Australian representatives.

"The Foreign Influence Transparency Scheme, as its name implies, is about transparency," he said.

"So it's a dose of sunlight, which I would think everyone would welcome."

He alluded to the national security element behind the cable deal with the Solomons and PNG.

"We value our strong and enduring friendship with Solomon Islands, and work as partners to ensure stability, security and prosperity in the Pacific region," he said.